What employment decisions rise to the level of corporate board matters?
Which of the following corporate actions do you think requires board of directors' authorization:
firing the CEO,
laying off workforce,
adopting a new handbook,
adjusting a corporate officer’s compensation?
Best corporate practices would say, all of them.
Where a corporation undertakes a major employment decision, e.g., firing its CEO, that action must be duly authorized by the board of directors.
Such removal of a corporate officer is placed with the power of the board by statute.
The board elects or appoints corporate officers. BCL § 715(a). The board has the power to remove an officer with or without cause. BCL § 716(a).
Clearly, removing a corporate office is within the purview of the board of directors.
But even beyond terminating a corporate officer, if the corporation’s employment decisions significantly impact the lives of its workforce, such as layoffs, formulating significant new handbook policies, major compensation changes, it should have its board of directors authorize the decisions.
Remember that directors manage “the business of a corporation.” BCL § 701. Managing the business of the corporation entails overseeing major policy changes including those regarding employment matters.
Having the board of directors review and authorize major employment decisions will help ensure that good employment advice is put in place and will be followed. It will enable the board to guide such decisions and ensure that the decisions are aligned with other business judgments that the board is making.
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